With prices above US$8,500 per ton in the international market and a favorable regulatory framework, cocoa producers still must deal with climate change and the demands of the European market to sell the so-called “golden nugget.”
The fame of cocoa as a raw material for chocolate is universal. As a base for sweets, desserts, drinks and even beauty products, cocoa has surprised in recent weeks by experiencing an unusual rise in its global rates. This March 22, it reached a sales price of US$8,603 per metric ton, according to IFC Markets . This is an increase of 25% in one week and an increase of 215% compared to the previous year.
The causes date back to a sharp drop in cocoa production in the Ivory Coast and Ghana. In these West African countries, an outbreak of “black pod” has occurred since last year. It is an aggressive and rapidly expanding fungus that destroys the ears and thrives in excessively humid environments. It is another notable consequence of the El Niño Phenomenon, which has affected the planet since 2023 and in both African nations, generates excessive rains that damage crops.
“There is talk of a deficit of 500,000 tons in Ivory Coast and Ghana, which obviously, representing 70% of world cocoa production, creates a vacuum in the market. This in turn causes a wave of speculation in the markets of New York and London, generating historic increases that have impacts worldwide,” explains Iván Ontaneda, former Minister of Production of Ecuador and current president of the board of directors of the National Association of Exporters of Cacao (Anecacao) for AméricaEconomía .
EUROPEAN RESTRICTIONS
It should be noted that climate change is only the tip of the iceberg of the production deficit. Geff Endara, an Ecuadorian businessman based in Spain and CEO of GenGroup Corp, a consortium dedicated to the international trade of cocoa, coffee and other commodities , points out that the European Union (EU) restrictions on export conditions have impacted agro-exports since Latin America and Africa.
“European regulations have required good agricultural practices from producers of cocoa and other products that involve avoiding the use of chemicals harmful to the environment. Unfortunately, plant diseases often need these chemical accompaniments to prevent the spread of pests. By preventing the use of glyphosates or other compounds and in the absence of alternative methods, production has been affected,” declared Endara for AméricaEconomía .
The immediate consequences of the rise imply a decrease in the acquisition of cocoa in international markets. From his perspective, Endara notes that European buyers are now more selective when using raw materials for certain products.
“This means that if you plan to produce a certain amount of chocolates, bars or substitutes, you are limited to choosing the product that generates the most profitability for this industry. Now there is more commitment to chocolates, since it is a product that generates greater profits, due to the greater volume of production or transformation of the raw material. Cosmetics, derived from cocoa butter, are also a clear example,” explains Endara.
It may be ironic, but Ecuador, a country historically affected by the onslaught of El Niño, is the protagonist among those benefiting from the global rise in cocoa. As an example, in the last edition of the Cacao of Excellence contest , among the ten best producers, two Ecuadorians were awarded. On the other hand, the most recent macroeconomic figures are encouraging: according to the Central Bank of Ecuador, national exports of cocoa and derivatives have grown more than 40% since 2021. In that year, sales of US$ 940 were also reported. .3 million and by 2023, these had amounted to US$ 1,322.8 million.
Inside, the country has more than 138 registered companies that are dedicated to the preparation of chocolate and processed products, according to Anecacao. Of this sum, around 61 companies export their goods abroad. Likewise, among the main recipients of Ecuadorian cocoa are the United States, Germany, Spain, and even emerging Asian economies such as Indonesia and Malaysia. It is clear that the cobs have international distribution, but the question arises how much Ecuadorian producers receive in return and in an atypical context.
In that sense, Ecuador comes out well, because its farmers receive one of the highest percentages of the international price of cocoa. “We do not have a regularization that prevents the producer from accessing these prices. This allows you to receive 92% of the farm gate price . We are talking about how today a farmer is receiving profits greater than US$350 for a quintal of cocoa. While a year ago, I only got US$100,” Ontaneda declares. Finally, unlike African countries, in Ecuador, there is better availability of labor in the cocoa industry, due to the absence of slavery and forced labor in the sector.
CLIMATE CHANGE AS A CHALLENGE
However, nature is independent of the systems created by humans and therefore, not all cocoa producers have escaped suffering from problems similar to their African counterparts. For six years, journalist Susana Cárdenas has run Cárdenas Chocolate , a company that uses the national variety of Ecuadorian cocoa to manufacture chocolates with a purist essence with the aim of selling them in the domestic and European markets.
Marveled since her childhood by the fruity smell of cocoa and the peaceful environment of the Chone Valley, located in Manabí, northwest of Ecuador, Cárdenas managed to position her brand in the old continent to the point of winning 12 consecutive awards at the Chocolate Academy of London. Currently, to enhance the brand, it uses production from its personal farm, as well as a series of properties belonging to its local partners. However, climate change has forced them to face the most critical moment of the venture.
“This year has been totally atypical. In previous years, by the time March arrived, between 1,200 to 1,300 pounds of cocoa were harvested on a single farm. Now we reach, if we are blessed, 200 pounds of cocoa.” What has happened? El Niño arrived late, but he finally arrived and this area was completely flooded. That has obviously affected the entire harvest,” Cárdenas told AméricaEconomía .
In this way, the Chone River and its tributaries, sources of life in the valley, devastated multiple plantations and the resulting humidity generated pests of fungi and insects that decimated production, just as happened in Africa on a larger scale. For Cárdenas, the impact was greater, because the harvest peaks in the Chone valley are concentrated between December and April, a period in which El Niño has manifested itself with extreme intensity. “Generally we like to harvest at the beginning of the period, because it is normally the peak of production. For this reason, our editions are very limited,” says Cárdenas.
When at the end of 2023, the global rise in cocoa began to be a reality, the chocolate businesswoman estimated that the dry quintal of the pod would reach US$300. Today, Cárdenas admits with surprise that her predictions were widely exceeded: if the ton cocoa metric exceeds US$ 8,600, so she expects that the quintal is already quoted at least US$ 375, a figure even higher than that stated by the president of Anecacao. It represents an increase that, in times of productive prosperity, is beneficial for producers, but it is a challenge, both for chocolate makers who must deal with expensive raw materials, as well as producers who face periods of shortage.
THINK SHORT AND LONG TERM
Despite this setback, Cárdenas does not lose optimism about the potential of the so-called “golden nugget” of Ecuador. “Last year, we had a generous harvest. And on this occasion, although we need a reevaluation of prices, I trust that our market niche in Europe will know how to appreciate the difference between a chocolate of unknown origin with one made with a national cocoa of origin, from an area that has been producing since 1890. There is a very strong trend that emerged in the United States with the Bean to Bar movement and that later spread to Europe. It covers both artisanal and larger-scale producers,” explains Cárdenas.
Regarding the varieties preferred by the European market, the businesswoman clarifies that customers tend to be very purists: they opt for chocolates with high percentages of cocoa, regardless of the bitterness. Although in Switzerland, some peculiar alternatives have become relevant, such as chocolate with jipijapa coffee, a variety also native to Manabí.
“Ecuadorian cocoa is currently very well positioned in Germany, France and part of Switzerland. Its main competitors are the varieties from Central America and Peru, although there is a shared reality for everyone: the high season will not last long. Peak sales occur between April and May; From June onwards, there is a drop,” warns Geff Endara.
The businessman adds that the Latin American industry in general lacks policies that promote the conversion of alternative plantations into cocoa plantations. By the time production begins on the few new plantations, African countries will have regained their market shares and prices will return to normal. It is worth asking if this global rise is a simple mirage for the Ecuadorian “gold nugget” or a new opportunity to shine among lovers of chocolate, beauty products and good taste.
